Foreign exchange reserves decline
strong and proactive policy response was necessitated by a deterioration in the outlook for inflation and an increase in risks to external stability.
addition, there has been a decline in the SBP’s foreign exchange reserves largely due to debt repayments and government payments on settlement of an arbitration award related to a mining project,” the bank said.
Pakistan faced a default situation last week when it struggled to deal with the external pressure to pay off debts against fast-sliding foreign currency reserves. Pakistan’s
State Bank reserves, which dipped to $11 billion, include $6 billion worth of deposits obtained from China and the United Arab Emirates.
an emergency, China and the UAE came to the rescue and bailed out the country from a looming debt default situation. Pakistan’s major creditor China and the UAE have rolled over their loans worth $6 billion, giving Pakistan some breathing space amid
tight financial stress.
The UAE rolled over a $2 billion loan for a further one year. However, Pakistan also needs to pay yet another debt
of $450 million to the UAE, which became due a few weeks ago. Dubai has demanded its money back, but Islamabad wants to get it rolled over given reserves constraints.
Pakistan’s former foreign minister Shah Mehmood Qureshi, who visited Beijing last month, disclosed that China would roll over a whopping $4.2 billion debt repayment to provide a major relief to its all-weather ally to tide over
its current economic crisis.
The relief was part of Pakistan’s formal demand to Beijing for financial support of about $21 billion on
the rollover of existing loans of $10.735 billion and a further $10 billion as a deposit fund to deal with external pressures and future financial demands.
Pakistan’s Ministry of Finance is actively pursuing the proposal for further facilities with Chinese officials, seeking an early release of $21 billion. Islamabad has directed its ambassador to China, Moin ul Haque, to follow up on the three
proposals with relevant Chinese authorities to bring in external account stability and meet budgetary needs.
The ambassador has also been directed
to arrange a meeting of the governors of the central banks of the two countries to discuss the proposals.
“Pakistan is spending too much
on imports. The current account deficit is about to hit the $20 billion mark, which is 6% of the GDP,” said Saleem, the Islamabad-based Pakistani political scientist. “A full-blown balance of payment crisis is high, but the state is in ‘deliberate
“The BoP crisis is a fabricated, deliberate depression. Public services have collapsed and the main burden of the crisis
fell on the middle and the poor classes. The BoP crisis is a trigger for 100 other crises. The BoP crisis becomes a threat to a country’s long-term stability and social peace.”
12 Apr 22/Tuesday